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C Vijayakumar, president & chief executive officer, HCL Technologies

HCL Technologies’ acquisition of IBM’s products including Appscan, Notes & Domino and Connections will help the Indian software giant add more names to its client base while also enable cross-selling of its products and services, according to industry experts.

“The deal demonstrates HCL Technologies’ aggressive focus on transition to platform and product‐led solutions,” analysts at Edelwiess Securities said in a report. They added that the deal provides a strong product portfolio, enhances cross-selling opportunities and geographical reach in HCL Technologies’ Mode-1 services.

Ravi Menon and Ashish Agarwal, analysts at Elara Capital also expect IBM products to fare well under the Indian firm. They said that the move will help the acquirer in clearing backlog of tickets to improve client satisfaction among installed base and invest in support for new technology, such as containerization to improve value proposition of products.

HCL Technologies’ future road map also lists steps to innovate with new technologies, such as Artificial Intelligence and Machine Learning that can change the way products are used, and create a cross-sell with “as-a-service” model. Elara Capital said that this alone could be a multi-billion service in the medium-term. “For instance, AppScan can be used to create cybersecurity-as-a-service,” the report added.

On 7 December, HCL Technologies said that it was acquiring seven of IBM’s software products for $1.8 billion, a valuation that “appears high” according to analysts at Edelweiss Securities. These products are Appscan, BigFix, Unica, Commerce, Portal, Notes & Domino and Connections. However, Elara Capital said that the market is ignoring possible synergy for HCL Technologies from client access.

The transaction is expected to close by mid-2019, subject to completion of applicable regulatory reviews, HCL Technologies said in a statement.

“We continue to see great opportunities in the market to enhance our Mode-3 (Products and Platforms) offerings. The products that we are acquiring are in large growing market areas like Security, Marketing and Commerce which are strategic segments for HCL. Many of these products are well regarded by clients and positioned in the top quadrant by industry analysts.” said C Vijayakumar, president & chief executive officer, HCL Technologies.

“Over the last four years, we have been prioritizing our investments to develop integrated capabilities in areas such as AI for business, hybrid cloud, cybersecurity, analytics, supply chain and blockchain as well as industry-specific platforms and solutions including healthcare, industrial IOT, and financial services,” said John Kelly, IBM senior vice president, Cognitive Solutions and Research. “We believe the time is right to divest these select collaboration, marketing and commerce software assets, which are increasingly delivered as stand-alone products. At the same time, we believe these products are a strong strategic fit for HCL, and that HCL is well positioned to drive innovation and growth for their customers.”

HCL Technologies provides credit cards, payments, cash management, corporate lending, consumer lending, core banking, risk management, financial accounting and treasury management solutions to banks.

Also read: HCL to work with Barclays on digital workplace plans

by Parnika Sokhi
Senior Regional Correspondent (India, Middle East & ASEAN) You can reach her at parnikas@ibsintelligence.com
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